If it’s Friday, it must be the end of a wild week in the Wild West, where winded traders’ wondrous winnings are tallied and taken, lost and lamented.
How’s that for an alliterative sentence?
The numbers: Take Thursday. In what The Financial Times described as “one wild 20-minute period,” bitcoin prices surged more than $2,000 to $19,000 and then plummeted to $15,000. That’s simply as logged on Coinbase. Spreads on other exchanges, said the financial publication, stood at $4,000.
Of course, should we assume that liquidity might be a little more fluid when bitcoin futures start trading on the Cboe?
Against the wild swings we just mentioned, the entrances are getting crowded … as Bitfinex said that there had been “significant” denial-of-service attacks on hand, which has bedeviled operations for days.
The news in just the last several hours spotlights growing pains amid frenzy (and hacks and millions of dollars lost), which, of course, spotlights the need for uniformity, not just in where and when cryptos trade, but how.
That is being ironed out, perhaps. Depending on where you stand, the gold rush is on, or “hey, rube” is the name of the game. Or maybe a true sea change is afoot, where fiat is finis.
So, the question, the large one: Would you risk it all … for the chance to risk it all?
Double-digit percentage gains and losses are not uncommon. We get it. But beyond the headlines, the data is far-flung and fragmented — and inefficiencies and illiquidity reign as bitcoin and its brethren change hands, as just the latest FT piece attests.
Amid that enthusiasm (or, some would say, froth), the fact remains that there may be a market for those who make the markets, with the need to get information out to those who want it as they make trading or investment decisions (we submit there is a difference between the two). With haste.
One company, CoinFi, billed as a cryprocurrency market intelligence platform, is seeking to do just that — to bring real-time information to the nascent crypto markets. The company said earlier this week that it would bring an initial coin offering (ICO) to market, capped at $15 million. The company is seeking to boost its trading tools and data access to those who would trade in crypto. In addition a portion of the funds raised, the company has stated via release, will go “to compensate and leverage the power of the crowd, which will help curate and produce content in a unique token-for-information ecosystem.
Here, then, is the risk-it-all scenario. In an interview with PYMNTS, CoinFi Co-Founder Timothy Tam said he left a lucrative Wall Street career as a trader with Goldman Sachs to launch the platform. The genesis, he told us, was one that stemmed from his own trading in bitcoin and a few other cryptos. “From my angle right from the start, I saw there was a wealth of opportunity” amid the volatility and perceived upside of massive movements logged in days or hours.
Why leave now and start CoinFi? “It’s one of those things where I am really deep in the rabbit hole. I really believe that bitcoin” and other currencies “will change the way finance is done,” he told PYMNTS.
He noted that this early in the game, the trades he sees in the crypto markets echo those seen in the early 1990s.
Tam and CoinFi Co-Founder Han Chang realized, amid early tools developed, that the hedge fund and the traditional trading world had basic technological tools of the trade that weren’t (and still aren’t) available to the crypto world. And so, the duo started building those tools, embracing trading signals and algorithms.
Looking at cryptocurrencies in general, Tam said that mispricing has been tied to the fact that the market(s) still are in stages of development. He offered the example where there is a 25 percent price differential between bitcoin listed in Korea and bitcoin listed in the United States via separate exchanges. Part of that disparity is due to capital controls, and a lack of parity also stems from the fact that in certain countries (like Japan, where bitcoin is trading at a 2+ percent premium to the U.S.) bitcoin is traded by retail holders, who are, in turn, bidding the price up. The spreads should start to narrow as “the first domino to fall, simple arbitrage,” loses momentum, especially as institutional trading starts to increase.
Even as cryptocurrencies gain, well, currency, regulators are grappling with what Tam said has become “a global phenomenon” — which is a challenge when regulation is, of course, done through jurisdiction. China represents one extreme of the process, having cracked down en masse on ICOs and cryptocurrencies. By contrast, said Tam, the Securities and Exchange Commission in the United States “[does] not know that blockchain and cryptocurrencies are here to stay.”
Taken as a whole, regulators have been less aggressive than expected because the world is so interconnected, he said. The global financial centers — the U.S. and the Asian hubs in particular, he added — have taken a relatively measured pace on the realization that capital will just go somewhere else.
But beyond trading, Tam told PYMNTS, a business model endures and bodes well for cryptocurrencies, whose very existence amid decentralization hearkens deep change in finance. The fact that far-flung governments are seeking to regulate them, that Wall Street money is coming in and that funds are already forming and committing investments in this space — all of these can be taken as signals that “this is becoming readily accepted.”
When pressed about what data beyond trading technology is needed most urgently, the executive said there is a gap in the ability to gather and digest relevant news. If you want to find a piece of news nowadays that may be rocking bitcoin up or down, he said, “you are going to have to dig through several channels.”
Thus, the CoinFi platform compensates people for content and analysis that proves pithy and useful. “Internally, we have a way to rank and see how popular certain pieces are” and how useful they are to users, Tam said, of the service now in prototype. Tokens are also used to gain access to that content, he said, and compensate the authors. “The technology is there. We just need to seed it with people,” he said.